Top 5 Ways to Get Out of Debt

Top 5 Ways to Get Out of Debt

Another New Year is upon us and many people like to use this time to evaluate their life, including their financial well-being. It’s also a time to make resolutions or goals. One common goal at this time of year is to finally get out of debt. Debt can be very debilitating. It never takes a day off and it never even sleeps. Getting out of debt is often a long, tedious process that includes several pitfalls and setbacks. There are a lot of ideas about the best way to get out of debt. So let’s take a look at some of the top tips to keep in mind if you’re ready to put debt in the rearview mirror for good.

Organize All Your Debt

The first thing you need to do is come up with a plan to pay off your debt and then organize all your debt. That means you need to line up all your debt and pay off the largest debts first. To do this, you will need to put as much money as possible towards your large debts and make the minimum payments to the smaller ones. Another excellent way to organize your debt is to consolidate it, which means you’ll have fewer payments to worry about.

Don’t Make the Minimum Payment

One of the worst things about debt is interest because it means you actually owe more than you paid and you will continue to pay more interest until the debt is paid off. Therefore, if you are able to make more than the minimum monthly payment, you should. The quicker you pay off your debt, the less interest you will have to pay, which means your overall bill will also be less.

Control Your Spending

You must learn how to control your spending. The reason you got into debt in the first place was that you spent more than you had, usually on things you thought you needed, or just simply wanted. You must be willing to cut your costs if you want to get out of debt. Only purchase needed items. Create a budget and a payment plan and stick to it. Stay away from eating out, cable television, and other unnecessary purchases. This also means you must stay away from creating more debt, especially by using your credit cards. If you don’t have the money to purchase an item, then avoid the temptation to charge it. That will only add to your debt.

Use Extra to Pay off Debt

Sometimes, we end up with extra money in our budget. It’s always tempting to splurge a little when we have an unexpected surplus. However, this usually turns out to be a waste. If you really want to get out of debt quickly then you should put any extra money you have towards your debt.

Try a Balance Transfer or Ask for Lower Rates

Another option is to transfer a balance from one creditor to another, which often gives you several months of interest-free payments, which helps you pay down your debt faster. You could also try seeking lower interest rates on your credit cards by working out a payment plan with your creditors. In the end, you have to be willing to give up several bad habits and make the decision that getting out of debt is more important than anything else.

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Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com.  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.

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